Microsoft starts canceling Claude Code licenses

Microsoft first started opening up access to Claude Code in December, inviting thousands of its own developers to use Anthropic’s AI coding tool daily. It was part of an effort to get project managers, designers, and other employees to experiment with coding for the first time, and sources tell me that Claude Code has proved very popular inside Microsoft over the past six months. Perhaps a little too popular, as Microsoft is now preparing to walk back its Claude Code push.

Microsoft starts canceling Claude Code licenses

Thousands of Microsoft developers will use GitHub Copilot CLI instead

Thousands of Microsoft developers will use GitHub Copilot CLI instead

I understand that Microsoft is planning to remove most of its Claude Code licenses and push many of its developers to use Copilot CLI instead. While Claude Code has been a popular addition, it has also undermined Microsoft’s new GitHub Copilot CLI coding tool — a command line version of GitHub Copilot that runs outside of development apps like Visual Studio Code.

I’m told that Microsoft’s Experiences + Devices team, which includes the engineers responsible for Windows, Microsoft 365, Outlook, Microsoft Teams, and Surface, is winding down its usage of Claude Code by the end of June. Sources tell me that engineers are being encouraged to start transitioning their workflows to GitHub Copilot CLI in the coming weeks, ahead of the cutoff.

Microsoft is telling employees that the decision is about converging on Copilot CLI as its main agentic command line interface tool across Experiences + Devices, but sources tell me the decision is also a financial one. The June 30th cutoff is the last day of Microsoft’s current financial year, and canceling Claude Code licenses is an easy way to cut some operating expenses for when the new financial year starts in July.

“When we began offering both Copilot CLI and Claude Code, our goal was to learn quickly, benchmark the tools in real engineering workflows, and understand what best supported our teams,” says Rajesh Jha, executive vice president of Microsoft’s experiences and devices group, in an internal memo seen by Notepad. “Claude Code was an important part of that learning… at the same time, Copilot CLI has given us something especially important: a product we can help shape directly with GitHub for Microsoft’s repos, workflows, security expectations, and engineering needs.”

The transition away from Claude Code won’t be an easy one for engineers inside Microsoft, though. Microsoft had been encouraging employees without any coding experience to experiment with Claude Code, allowing designers and project managers to prototype ideas. Microsoft had also originally expected employees to use both Claude Code and GitHub Copilot, to compare the two and provide feedback.

Microsoft’s own developers have favored Claude Code over GitHub Copilot CLI in recent months instead, and there are still gaps between the products that will now need to be addressed. Microsoft had reportedly considered acquiring Cursor in recent months to help close the GitHub Copilot gap, but has started looking at different AI startups to bolster its AI ambitions and avoid potential regulatory scrutiny.

“We are partnering closely with GitHub and continue to improve Copilot CLI for Microsoft engineers,” says Jha. “The GitHub team has already shipped significant improvements based on Microsoft feedback, and Experiences + Devices will remain closely involved in shaping the product. This is a shared accountability across GitHub and E+D leadership: to make Copilot CLI the best agentic coding experience for Microsoft engineers.”

Anthropic’s models will remain accessible through Copilot CLI, along with internal-only Microsoft models and OpenAI’s range of models. I understand that Microsoft is planning to invest more in Copilot CLI so it’s deeply integrated into Microsoft’s own engineering workflows. Microsoft is also encouraging developers to file bug reports and feedback on Copilot CLI ahead of Claude Code being removed.

Microsoft quickly became one of Anthropic’s top customers earlier this year and has even reportedly been counting selling Anthropic AI models toward its own Azure sales quotas. Microsoft also signed a deal with Anthropic in November that allows Microsoft Foundry customers to get access to Claude Sonnet 4.5, Claude Opus 4.1, and Claude Haiku 4.5.

The decision to cancel Claude Code licenses won’t have any impact on the Foundry deal, and Microsoft employees still continue to favor Anthropic’s Claude models inside Microsoft 365 apps and Copilot, where they’re more capable at certain tasks than OpenAI’s counterparts. Microsoft also worked closely with Anthropic recently to bring the technology behind Claude Cowork into Microsoft 365 Copilot.

The pressure is now on Microsoft’s GitHub team to improve Copilot CLI and try to surpass Claude Code in the process. Microsoft told me last year that 91 percent of its engineering teams were using GitHub Copilot, but Claude Code usage over the past six months has definitely had an impact on that number. Microsoft now wants to turn GitHub Copilot usage around and have its own engineers once again improving its own AI coding tool.

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